Weekly Kickstart (07/31/2017-08/04/2017)

7/31/17 8:00 AM

The market melt-up took a pause last week, as the S&P 500 declined by 0.02 percent to 2,472.10. That fractional loss left the benchmark index up a solid 10.42 percent year-to-date, and just 0.23 percent below the all-time closing high. One thing that has helped lift the broad market recently is the price of crude oil, which increased every day last week and kept upward pressure on the share prices of companies in the energy sector. Another issue that traders were paying close attention to last week was the latest decision on monetary policy from the Federal Open Market Committee (FOMC). Indeed, officials on Wednesday announced that the target range for the federal funds rate would be kept at 1.00-1.25 percent.

Although it was widely expected that the Fed would hold steady with rates this month, the statement released by the committee was a bit more dovish than anticipated. For example, officials more firmly acknowledged the recent declines in the key measures of headline and core inflation that they monitor, which is supportive of the argument that the committee will hold off on another hike until the December FOMC meeting. Incoming economic data could of course influence the Fed’s timetable going forward but regardless of when officials decide to adjust monetary policy again, a recent Gallup survey suggests that so far relatively few investors have been affected by higher yields. Specifically, two-thirds of respondents reported that the four quarter-point rate increases made by the Fed since 2006 have not had any meaningful impact on their investments. Almost three-quarters of surveyed Americans also said that higher rates have yet to have any discernible effect on their personal finances.

To recap a few of the things we learned about the economy last week, the positives included that mortgage and refinance applications rose, new home sales lifted, housing inflation cooled, durable goods orders increased, consumer confidence firmed, the nation’s trade deficit in goods narrowed, and U.S. gross domestic product (GDP) rebounded in the second quarter of 2017. As for the negatives, existing home sales declined, core capital expenditures fell, gauges of regional manufacturing activity sent mixed signals, initial jobless claims increased, and the growth rate of employers' benefits costs continued to accelerate. This week the pace of economic data picks up with several important reports on housing, manufacturing, inflation, and employment scheduled to be released, including the potentially market-moving July job report from the Bureau of Labor Statistics (BLS) due out on Friday.